The Middle East CRM Software Market and Landscape

All regions that parcel the globe have variations in cultures, language, politics - and customer management business practices. Arguably the Middle East has the most diversity between extremes matched only by the Asian-Pacific region. It should come as no surprise, then, that the region cannot be neatly pigeon-holed for business or software planning purposes. Any approach to this region based upon monolith stereotyping will sorely fail.

But that is not to say that the region does not share common market characteristics. Chief among them is a suspicion of outsiders. This characteristic, quite understandably, has grown from years of war and tense political and religious differences throughout the region.

Here in the Middle East, relationships are not merely a social benefit but a long-held strategy for survival – in terms of all human realms: personal, family, business, political and religious. It comes as a surprise to many Westerners that social relationships in this region usurp the typical Western procurement triggers such as superior products, lower pricing, higher efficiencies, company size, trends, and brand names. To sell anything in the Middle East, and particularly business software systems, requires establishing a trust-based relationship before any deal is done. This is true in selling CRM software products to Middle Eastern companies and it is true for companies using CRM to sell to customers in the Middle East.

For a CRM software vendor to be successful in the region it must understand and incorporate this vital and profound need for relationships on all sides of the equation. “In the Middle East, companies like to buy local,” explains Michael Maoz, vice president and Gartner Distinguished Analyst. “They don’t buy, say, Oracle. They buy Oracle Saudi Arabia.”

CRM vendors cannot successfully sell from afar. Neither can a provider merely open a business arm in the Middle East and expect to earn much market share on its own. Here it is better to partner with a consultancy or a solutions provider in order to leverage established business relationships. “If you say to a Middle Eastern company ‘Our CRM product is cheaper or our product is better’ you’ll likely get only a shrug of the shoulders,” says Maoz. “They will do as their trusted business partner says to do, even if that means running antiquated software.” “They do not buy software, they buy relationships,” he stressed.

Customer Relationship Management deployments in the Middle East differ substantially from deployments in the western world because of this strong preference for relationships and overriding suspicion of outsiders, and to a lesser extent new technology.

As an example, Software-as-a-Service (SaaS) CRM is much more cautiously approached. “Middle Eastern companies don’t have an interest in SaaS because they feel like they have no control over it,” says Maoz. “They prefer hosted and on-premise versions. They also have strong interests in private clouds and virtualization.”

However, a conspicuous exception to this rule is sales force automation (SFA). “They see it as so basic as to not be a threat,” says Maoz. “You’ll find salesforce.com use [in] the region for the SFA aspect of the service. But they are not much interested in other CRM features and functionalities if it comes as SaaS.”

Once a solid local presence is established, complete with long-standing relationships, a software provider can easily prosper for decades as customers tend not to churn. They also are typically more patient with the process and any issues or problems that arise with the product or the provider.

“In Brazil there is an appetite for automation, so early adoption is actually easier, but if the technology does not deliver it is quickly cast aside,” explains Andrew Graves, chief product officer at xRM Global. “By comparison, the process to adoption in the GCC may take a little longer, but there is a great deal more patience after the initial adoption process.”

GCC stands for the Gulf Cooperation Council and it consists of the countries on the Arabian Peninsula, excluding the Republic of Yemen: Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE, and the Sultanate of Oman.

CRM deployment in the Middle East is mostly in the beginning stages, “the phase where organizations are simply trying to get a good view of their customers” comments Maoz. Turkey, Greece, Egypt and Saudi are ramping up to move beyond that. These four countries are using CRM intensely in the banking and financial services markets and quickly moving forward in the telecom space. According to Gartner, Turkey, Greece and Israel are just now starting to move into the real-time decision support phase.

Most Middle East countries are jockeying for a larger share of the outsourced contact center industry. Research firm Ovum says in it’s report titled 'The Future of CRM Outsourcing in Egypt' that Egypt will almost double its outsourced contact center industry by 2015 despite the country’s political and economic instability.

One of the reasons Middle Eastern centros de contacto are growing in popularity is the cultural emphasis on developing and maintaining relationships with customers – a profoundly effective approach which highly leverages Customer Relationship Management software solutions. Another reason is that the potential agent pool is abnormally large and consists of many workers proficient in English and several European languages. Going forward, customer support may become a Middle East strong suit.

Maximizing labor efficiencies is not nearly as prevalent as in Western regions. Organizations in the region do not view customer management systems as a hands-free means of automating customer service. Instead, they see it as a means to assist the agent at doing a better job at delivering real and satisfying customer service. “They don’t try to build computers to assess whether the customer is happy,” says Maoz. “They let the agent decide if the customer is happy and what to do if the customer is not.”

The same applies to the use of medios sociales or Social CRM. “It’s almost the inverse of what’s happening in the U.S.,” explains Maoz. “Instead of using medios sociales to merely listen to customers, Middle Eastern companies are using it to proactively aid customers.”

Gartner cites several examples of innovative use of medios sociales in CRM in the region. The first is of a bank that provides clients with a snapshot of what people like themselves are doing in banking. “For example, a couple in their forties at a certain income level with savings and investments and of a certain risk tolerance level can see how other people their age, income bracket and risk tolerance are managing their money affairs as a group,” explains Maoz. “This helps you consider and decide from ideas and options you may not have thought of, or it may simply reaffirm you that you made a right decision.”

There’s more to analyzing than just listening to customers and initiating micro-campaigns. Social CRM campaigns and offers are highly specific and therefore better received. “The change in acceptance of offers is remarkable, 25% above the standard, general offers,” comments Maoz.

Another example of Customer Relationship Management innovation in the region is the emerging practice of paying technicians to spend extra time on service calls to engage customers and discover what their current and future needs are. “This is a boots-on-the-ground, highly effective face-to-face approach to customer service as opposed to some Western methods of timing technicians to constantly reduce time spent on each service call.”

In a nutshell, in the Middle East CRM emphasis is on the ‘relationship’ part of customer relationship management whereas the emphasis is often on ‘management’ in the Western world. Keep that fundamental difference straight and your Middle East CRM plan will begin solidly on course.

Middle East CRM software systems cater to similar business objectives as other global regions, however, posses differences in format, functionality and operation. While many Middle Eastern CRM systems are in English, government and quasi-government organizations (which make up an extraordinarily large group) require an Arabic language set. Simple English to Arabic translation is insufficient as the Arabic Middle East CRM systems must also support a right to left navigation and mirroring change. Unique functionality related to customer records, opportunity records, quotes and similar business processes must also be accommodated. For example, including landed costs on a quote or sale order, accommodating post-dated checks and similar features are far more routine in Middle East CRM systems as compared to other global regions.

Corrie Armstrong

We're a midsize software company which makes a B2C and B2B medios sociales CRM product that integrates with customer relationship management systems such as SAP Business ByDesign, Salesforce.com and Oracle OnDemand. We deliver the product via software as a service from a data center in France. We're now looking to expand into the Middle East. Is there a most logical location to enter the Middle East market?

Chuck Schaeffer

Possibly, but you should first recognize that the Middle East is not a single homogeneous or monolith region, but an intersection of multiple regions where each possesses different cultural and business characteristics. The Middle East region is first broken down into the three distinct territories of Levant, North Africa and the GCC. The Levant region has the closest proximity to Europe, however, also has the lowest GDP, state controlled closed economies and is often associated with corruption, political unrest and instability. North Africa is a growth region, the Middle East cultural center (being Egypt, which is also the primary economy of the region) and is getting strong business expansion interest from the GCC and the outside world. Your question suggests at least part of your company may reside in France. The North Africa region was largely colonized by France so its possible you may find cultural or even networking business advantages in this region. The GCC, and in particular Dubai, is the most popular choice for multi-national entry to the Middle East market place. The six GCC countries achieve the highest GDP, are members of the WTO (although have received special exemptions), permit (limited) foreign ownership, offer free trade zones, and facilitate (relatively) simple travel. Dubai has created its infamous industry cities, such as Media City and Internet City, is challenging Bahrain to be the financial services hub of the region and is aggressively positioning itself as a gateway location to the broader market. Competing with Dubai is Doha, which is following many of Dubai's trail blazing practices, and Saudi (KSA) which is home to two-thirds of the entire GCC population and accounts for just over half of all IT spend in the region. However, while KSA is the largest IT consumer, the country is not anywhere near as economically progressive as Dubai or Doha. Regulatory bureaucracy is huge, travel (Visas) can be time consuming and simple business processes can be difficult. While the GCC is not particularly large (just over 40 million people, or about two-thirds the population of the UK alone), it is growing almost 300% faster than more mature markets. Hopefully some of this response is a helpful start. Ping me if you would like more information or the recommendation of in-country advisors.

Blake Hugon

If those are the three regions, why do so many U.S. and European companies use the term MENA?

Chuck Schaeffer

MENA (Middle East and Northern Africa) is largely a business term used to conveniently group and identify a business region. It has little to do with how the region identifies itself or to associate common cultural or business affinity characteristics. As the de facto regional name itself, of "Middle East", was coined from the U.K. and somewhat reinforced from the U.S. to describe a global region East of the U.K. but not as far East as China, the term MENA was crafted from outside the region for purposes of business discussion and convenience.

Parial Frey

Would you suggest staffing a middle east office with expatriates that are well versed in the business or hiring locals?

Chuck Schaeffer

The short answer is both. As human capital management is possibly the most challenging issue for multi-national companies, I recommend a very solid, time-phased plan be created and closely managed. Expatriates are likely required to kick start the business, however, for long term success, and due to each countries nationalization laws which require the hiring of locals, a mix may be the best long term balance.

Recruiting and retaining local nationals can be a very difficult process. Many companies simply add them to the payroll to achieve government compliance, however, don't expect them to be as productive, or even to show up in many cases. However, aggressive recruiting and career counseling can result in advancing nationals, leveraging their networks and ultimately making them part of the leadership team.

Your question is also influenced based upon which country you're staffing for. UAE, Qatar and Kuwait have very low unemployment and compensation plans for nationals are high. Bahrain, Oman and KSA are experiencing double digit unemployment and compensation plans are much lower. There is a very strong population of young professionals across the region. You may remember back to the oil boom in the 1970s and early 1980s. This period spawned a regional baby boom and today over half the population in KSA is below 25 years old while the surrounding GCC countries young population is slightly less than KSA.

Another interesting trend to be aware of is that there are more women college graduates than men among nationals in each GCC country. This presents an opportunity for multi-national companies seeking locals if they can accommodate the issues important to this growing group - such as support for work/family balance and non-gender based employment advancement.

Corrie Armstrong

What should we watch out for? What about race-based employment and bureaucracy?

Chuck Schaeffer

Relative to the U.S. (which is my reference point as I'm an American), managing a Middle Eastern business requires much more administration and regulatory compliance. I recommend a full time resource just to stay on top of government regulations and bureaucracy. For companies which leverage expatriates, you will need dedicated resourcing to deal with Visas, travel and expatriate living issues. Also recognize the stark differences of a class based culture. Stature, treatment and compensation are heavily influenced by race. Local nationals receive institutionalized preferences in all matters. In most companies, Western Europeans and Americans are next on the totem pole, followed by neighboring Arabs, then Indians and then everybody else (Asians, Africans, Philippinos, etc.) If you have a personal conflict with race based treatment that you cannot temper, the Middle East may not be for you.

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In the Middle East, companies like to buy local. They don’t buy, say, Oracle. They buy Oracle Saudi Arabia.”

Analyst firms consistently project the Middle East and GCC to outpace most of the rest of the world in IT spend and technology adoption.

IDC is forecasting a year‐over‐year growth in IT spend for the region of 11.0% in 2010, compared to 9.1% for Central and Eastern Europe, 6.3% for Latin America, 4.4% for Asia-Pacific, and just 1.2% for Western Europe.

IDC forecasts the global SaaS industry to increase sales to $40.5 billion by 2014, up from $13.1 billion in 2009 and that the 2010 shift to subscription software will result in a $7 billion fall in world-wide traditional software license revenue. The research firm indicates Europe, the Middle East and Africa account for just a small piece of the SaaS market, 13% in 2009, versus 74% in the Americas. By 2014, IDC projects the region will increase its share of such sales to 35%.

The Middle East and Africa is set to account for 17% of the world's net ICT expenditure from 2010 through 2012.

Companies in the MEA region are set to spend US $49.77 billion in 2010, with the Gulf region contributing about 25% of the total.

The UAE is projected to spend US $4.79 billion in ICT investment in 2010 alone, an increase of 12.4% on 2009.

The UAE leads all the Middle Eastern and African countries with US $983 in IT spending per capita.